This article is Machiavellian in nature. Those among you who have scruples about taking advantage of your employer will want to look away now, lest you join the rest of us reprobates on this cheerfully deceitful path.
Hopefully that scared away the goody-goodies.
The business world is full of opportunities for employees to take advantage of their employers. Public accounting is no exception. Those with iron will and a gray moral compass should find a number of opportunities to use loopholes for personal gain without risking legal repercussions. I want to reiterate this point: I am not suggesting you do anything illegal or act in a way that directly violates your employment agreement. Nor am I suggesting that you do anything that will harm your career, your colleagues’ careers, or cause irreparable harm to your employer. What I am suggesting is that you search for unusual situations where someone has unintentionally (or perhaps intentionally?) left a loophole that you can use.
Before I get into the details for public accounting firms, I want to present a loophole a colleague of mine used in her previous career with an insurance company. At this firm, she was an appraiser, which meant she looked at vehicles that had been in accidents. She determined what needed to be fixed, how much it would cost, and negotiated with body shops when the car was being repaired. Her employer mandated that she should perform 9 appraisals per day. There were no significant punishments or rewards for missing or exceeding this target on a daily basis, but she was strongly encouraged to maintain an average of 9 daily appraisals for the fiscal year. Exceeding the goal would mean better raises, bonuses, and opportunities for promotion.
She received appraisals at random from a computer system. When she logged on for the day, she would request an appraisal from the system’s queue, which were doled out on a FIFO basis. Generally, these appraisals would fall into one of three categories:
- Photos Only – A customer was involved in a minor accident. There was no dispute over who was at fault (e.g. a tree fell on their car, they hit a deer, or they were rear-ended at a stop sign), and the damage was considered limited enough that the customer could just send in photos of the car. She would write the appraisal from these photos, and send the estimate to the customer to take to their preferred body shop for repairs. These were considered the easiest appraisals, and she could complete one in 15 minutes if she was focused.
- Supplements – After a customer took their car for repairs at the body shop, the body shop found additional damage underneath the exterior. The body shop would send her photos or a revised estimate with the additional damage, and she would negotiate with them on the extra repairs. Most body shops were easy to work with, but because she needed to speak with them, these appraisals could take longer. Sometimes the body shops were trying to scam the insurance companies, which could also take longer to resolve. A smooth supplement appraisal could usually be complete in 20 minutes, but tough ones could take several days. These were considered medium-difficulty appraisals, if only because of the variability in how long it could take to resolve them.
- Standard – Basically any other appraisal fell in the standard bucket. If there was significant damage, or the adjuster couldn’t determine who was at fault, or she thought the claim might be fraudulent, it would be considered standard. Standard appraisals almost always took longer, required more negotiation, and posed the most problems. It would be difficult to complete a standard appraisal in less than 45 minutes.
After she finished an appraisal or progressed the claim as far as she could, she would request another appraisal from the computer system. Savvy readers will quickly see the imbalance here. If her coworker Jack received 6 Photos Only claims and 3 Supplements, he can hit his 9-appraisal target much faster than my colleague can if she received 5 Standards and 4 Supplements. Because the computer system doled appraisals out randomly, she never knew if she would have an easy day or a miserable day.
Then my colleague found a loophole. She was usually the first one in the office, arriving around 7:30 AM, and she noticed that the system would exclusively give out Photos Only claims before 8:00 AM. She found out that she could request 9 Photos Only appraisals before 8:00 AM, start working those in the morning, and effectively be done by noon. If she was feeling ambitious, she could request more claims later in the day, which would be random, or she could slack off.
This went on for about two months before she got caught. In that time, she had dramatically improved her metrics and received a number of positive reviews from customers for how quickly she handled their claims. Company leadership was naturally upset at her for taking advantage of their system, but there was nothing they could really do about it. She hadn’t violated any part of her employment agreements, she didn’t harm her coworkers or the firm, and she didn’t behave maliciously. She simply found a way to benefit herself by abusing a flaw in the appraisal system’s assignment programming. They patched this flaw, and everything returned to normal except her inflated metrics.
Public Accounting Loopholes
While the loophole described above would never exist in a public accounting firm, there are a variety of systems and situations you can game for your benefit. Finding these is often a simple matter of determining what leadership cares about, learning how they measure it, and finding weaknesses in their measuring process. In the insurance situation, she knew they cared about appraisals per day. They told her! She knew they measured it as the number of appraisals she requested from the system daily, not the number we completed. And mostly by pure dumb luck, she found a weakness in the measuring process. This same methodology can be applied to public accounting.
Most public accounting firms care about utilization. Utilization as a KPI has been around for decades. Its lengthy history has made it a tough metric to game for loopholes since most of the exploits have been patched out already. Still, there are a few areas to look:
- Denominator Calculation – Utilization is usually calculated by taking the total number of chargeable hours worked by an employee, and dividing this number by either a predetermined total hours target or an hours target with adjustments. The first instance, in which only an hours target is used, cannot be exploited. In this case, you only have control over the numerator, and fudging your timesheet is a quick way to get in serious trouble. However, if there are adjustments applied, you may have an opportunity to game the system.
Some firms adjust the utilization denominator down by the number of PTO hours you’ve used as a way to encourage people to take time off. In these firms, you can actually increase your utilization by taking PTO, which will reduce your denominator and not impact your numerator. If your firm measures utilization this way, and you have a large bank of PTO hours, you can deploy these strategically to juice your metrics.
- Chargeable Codes – Most firms only consider work done on an active engagement for the benefit of a client to be considered chargeable time. Some firms also have chargeable codes for internal projects, practice improvement, or specific administrative tasks. These codes usually have a partner in charge of monitoring their usage. If you have a strong personal relationship with this partner, you can ask to be involved in these projects and use these chargeable hours to juice your client-serving hours. Extra credit if the work you do on these internal chargeable codes can also be applied to a client-serving code, allowing you to double dip.
- Slush Funds – If you are involved in billing and engagement administration at your firm, you may be able to create a type of chargeable hours “slush fund” for yourself for when times are thin. For example, let’s say your partner sold a project for $50,000. It’s nearly complete, and your team only charged $35,000 worth of time to the code. While your partner would probably love for you to take the leftover $15,000 into income (basically giving this money to the firm, which ultimately increases the partners’ draws), you could also dole out the $15,000 to yourself and other employees in the form of chargeable hours. For simplicity, let’s say that managers are charged out at $1,000 an hour; seniors are charged out at $500 an hour; and associates are charged out at $250 an hour.
As the manager, you could charge five hours to the code yourself ($5,000), tell your senior to charge 10 hours to the code ($5,000), and tell each of your two associates to charge 10 hours to the code ($5,000). Each of you get a nice boost to your utilization metrics, and because these numbers are effectively monopoly money concocted by the firm for their arcane internal accounting practices, the firm loses nothing. They get paid $50,000 either way.
Firms consider a number of other metrics when measuring employee effectiveness. Performance reviews and invoice collection measurements are commonly tracked but are harder to manipulate than utilization. Beyond a simple “I scratch your back, you scratch mine” agreement with your reviewer, there’s not a lot of above-board manipulation to be done with qualitative metrics like individual reviews. Additionally, you definitely don’t want to get into a quid pro quo arrangement for a performance review that could be seen as misconduct. The best thing you can do with performance reviews is grade everyone a little higher than you think they deserve. Most firms only pay lip service to performance reviews, and should any of your review comments leak, it’s better to be seen as too generous than too stingy.
Invoice collection metrics usually require a strong relationship with the client to successfully manipulate. If you’ve got this kind of pull with a client, you probably don’t need advice from some blog. Just work something out with your colleague! And remember to not do anything that impacts real dollars and cents.
I encourage you to consider your individual situation and look for loopholes. No system is perfectly designed, so there are often flaws that can be harmlessly exploited. The key to finding them is knowing what metrics matter, how they’re measured, and what part of that measurement you can exercise some control over. Make sure you’re not violating any company policies or laws! The ideal situation is like the insurance example: engaging in cheeky shenanigans that boost your metrics but don’t open you to punishment. Losing your job in an attempt to modestly boost your KPIs isn’t playing the system, it’s playing yourself.